2012 Sustainability Report

 

Executive Summary

Con Edison provides energy services for ten million New Yorkers

Con Edison, Inc. (CEI) is one of the nation’s largest investor-owned energy companies, with over $12 billion in annual revenues and $41 billion in assets. The principal business segments of Con Edison, Inc. are Consolidated Edison Company of New York, Inc. (CECONY) with regulated electric, gas, and steam utility activities in the five boroughs of New York City and Westchester County; Orange & Rockland Utilities (O&R) with regulated electric and gas utility activities in southeastern New York and northeastern Pennsylvania, and electricity in northern New Jersey; and Con Edison’s competitive energy businesses, Con Edison Solutions (CES), Con Edison Development (CED), and Con Edison Energy (CEE).

From our early history lighting gas lamps to today’s cutting edge electric vehicle and smart-grid technologies, Con Edison has powered New York for nearly 190 years. A population of nearly ten million across New York City and Westchester County depend on us to provide safe, reliable, and affordable energy to light and warm their homes, run their businesses, and help the region grow.

This report outlines our sustainability strategy which will strengthen CEI and help us prepare for the challenges ahead, so that we can thrive and grow as a company for the next 190 years and beyond. The strategy is focused on three areas—environmental stewardship, supporting our communities, and expanding our economic value as a company.

In 2012, we experienced challenges associated with the expiration of the Collective Bargaining Agreement with Local 1-2 of the Utility Workers Union of America and Superstorm Sandy, our largest storm to-date which left well over one million of our customers without power in late October. We overcame these challenges and are proud of our many achievements throughout the year, especially in the areas of safety performance, strategic partnerships, environmental performance, and the vitality of our business as a whole.

Sustainability at Con Edison

Our sustainability strategy is aligned with the company’s strategic goals focusing on the development of projects that affect the triple bottom line—responsibility for our communities, our environment, and our financial strength. The strategy outlines our vision of providing our customers and the public with efficient, clean and sustainable energy and modeling green behavior internally. To do this, we have defined six principles which state that Con Edison will:

• Model green behavior internally
• Promote green behavior to external stakeholders
• Innovate to meet customer preferences for a green lifestyle
• Partner with governments to shape policies and standards consistent with its sustainability vision
• Develop infrastructure to advance the use and delivery of value-creating clean energy alternatives
• Incorporate environmental and societal values in its decision making

These six principles are supported by 14 goals and 35 initiatives, which recognize the importance of balancing economic, environmental, and social responsibility to ensure long-term success. In 2012, we made significant strides in the pursuit of excellence in each of these areas including but not limited to achieving strong results in our safety performance, implementing our new finance and supply chain system, growing our strategic giving and volunteer programs, and confirming our commitment to mitigating our carbon footprint.

Working Safely

We are committed to safety and strive to achieve an injury-free workplace. Employees take ownership for their own safety and that of their teammates through a robust safety program and daily communication about the importance of identifying and mitigating hazards. The result of these combined efforts was our best safety performance on record for both regulated utilities, achieving a Con Edison of New York OSHA Incidence Rate of 1.25, surpassing our goal of 2.21 or lower, and an Orange & Rockland OSHA Incidence Rate of 2.80, surpassing our goal of 3.54.

Our safety program is comprised of a number of initiatives to ensure the safety of our employees and the public. We remain committed to integrating public safety considerations in system planning, design work, and system operations. We consistently stress to our employees the importance of proper work area protection to make certain that our employees and the public are protected from potential hazards. We communicate with our customers through bill inserts, email, and through social media on ways that they can stay safe around our equipment and work-sites, as well as in advance a weather event.

Internally, a focus on human performance looks at how certain behaviors or actions can result in errors. We provide the training, and promote open communication and a questioning attitude, adhering to procedures, site and self checks, and job briefings to help reduce the likelihood of those errors. At Con Edison of New York, we focused in 2012 on situational awareness, ergonomics, and job planning:

• Having strong situational awareness with a questioning attitude will allow us to work safely, be responsible stewards of the environment, and avoid costly mistakes. To enhance ones situational awareness, we encourage employees to remain alert to their surroundings at all times, draw on their experience, training, and skills to evaluate every task. We promote speaking openly, asking questions, and remaining flexible to changing working conditions. Through this continued focus and consistent communications using our (THINK)(ASK)(PLAN) communication campaign, we saw positive results with a 45 percent reduction in injuries with a lack of situational awareness as a root cause from 2011 to 2012.
• A focus on ergonomic stressors such as task repetition, lifting, awkward postures and contact stress has also yielded significant results. Through increased training and on-site evaluations, we experienced 50 percent fewer ergonomics-related injuries in 2012 than we did in 2011.
• A Job Safety Analysis (JSA) identifies the potential hazards associated with each step of a particular job or task, steps to eliminate or reduce them, and specify controls needed to perform the job or task safely. The JSA program grew significantly in 2012 with the expansion of a company-wide electronic library making the JSAs easily accessible to all employees and providing models for future JSA development. In 2012, the efforts of the JSA program yielded a 33 percent reduction in injuries with job planning as a root cause.

Along with our programming, we also rely on our employees to identify ways that we can improve safety, and many of them in 2012 took it upon themselves to innovative new ways to make their work safer. One such example was the development of a cable cutting-head holder developed by a cross-functional team in Con Edison of New York’s Electric Operations organization. The team recognized that the improvised tool being used created a number of challenges and worked to design a new tool which is easy to use and can be deployed quickly. This was just one of a number of projects which our employees developed in 2012 to help keep our employees and the public safe while getting our work done.

Engaging Stakeholders

Supporting our communities is critical to the success of our business and a founding principle of sustainability. We recognize that our customers demand reliability, and we were greatly challenged in 2012 between heat waves in the summer and the impacts of Superstorm Sandy. We are dedicated to providing world-class service and reliability to our customers and spend significant time planning and preparing for events such as these in order to achieve that goal. This planning allows us to not only maintain a strong system but also to respond quickly and effectively when events occur. It's that kind of preparation and efficient response that led the Edison Electric Institute (EEI) to name Con Edison of New York and Orange and Rockland among the winners of its 2012 Emergency Recovery Award, for exemplary restoration response to Superstorm Sandy.

Along with providing reliable service to customers, we are also focused on helping them to conserve through energy-efficiency and demand management programs. These programs are truly sustainable, helping our customers to reduce costs, their carbon footprint, and the peak demand, keeping critical equipment from overloading on the hottest days of the summer. In 2012, Con Edison of New York helped our customers conserve 692,000 MWh and 436,000 dekatherms through our energy efficiency and targeted demand-side management programs the equivalent of taking more than 40,600 cars off the road. Since 2009, Orange and Rockland has helped their customers to save approximately 35,000 MWh and 37,000 dekatherms. The company is also supporting customer oil-to-gas conversions, lowering their bills and their carbon footprint. In 2012, we completed over 800 conversions throughout the Con Edison of New York and Orange and Rockland territories, switching customers from the use of heavy fuel oils to cleaner burning natural gas.

Our efforts to modernize the grid are also helping our customers. Through 2012, Con Edison installed more than 13,000 sensors and transmitters on underground transformers, nearly 4,000 new communicating system meters, and 580 remote-controlled switches along with four smart-grid demonstrations. Con Edison of New York and Orange & Rockland have both supported the ability for customers to install energy generation on-site. Over 190 MW of distributed generation has been installed throughout the service territories of both companies, providing our customers with the opportunity to better understand and control their usage and integrate their own renewable energy if desired.

Along with working to support our customers, we are dedicated to contributing to and maintaining the social, cultural, and economic vitality of our service area. In 2012, through our strategic partnerships, we supported more than 1,000 nonprofit organizations whose programs illustrate our dedication to healthy and sustainable communities. That support comes from nearly $8 million in charitable funding as well as the dedication of our employees’ time through our strong and loyal volunteer corps and employee participation on nonprofit governing boards, partnerships, and collaborations.

An understanding of sustainability stresses the importance of supporting our workforce as well. We recognize that our most important resource is our people. In 2012, we were challenged with the expiration of the Collective Bargaining Agreement with Local 1-2 of the Utility workers Union of America. However, this challenge did not overshadow our 2012 focus on promoting the health and safety of our employees, as well as making progress with engaging employees in our ongoing cultural evolution. Throughout the year we introduced new initiatives and improved upon existing programs to strengthen our cultural imperatives of cost management, engendering openness, fairness and trust, and enhancing stakeholder relationships. We recognize that cultural transformation will not happen quickly, but we continue to focus on signs of progress and examples of success.

Regarding the Environment

We are committed to minimizing our impact to, and enhancing, the environment in which we work. Similar to our safety performance, 2012 was a top year in terms of our environmental performance. Reducing our emissions continues to be a focus. Our direct emissions come primarily from the combustion of fossil fuels at our steam and cogeneration stations as well as leaks from equipment containing SF6, our gas distribution system, and the emissions from our fleet. We have established programs to reduce our emissions in each of these areas including:

• The expansion of gas burning capability at our steam generating stations
• An extensive leak-detection and equipment-replacement program to reduce emissions of SF6
• A pipe-replacement program on our gas system
• A fleet-replacement program with a focus on purchase of hybrid and CNG vehicles

We set a goal to reduce our direct emissions by more than 40 percent of 2005 levels by 2020; in 2012, we continued to surpass that goal reaching a total 45-percent reduction. These emissions are verified and reported as required to the EPA as well as voluntarily to organizations such as the Carbon Disclosure Project and The Climate Registry.

Conservation is a key priority for us, and the wise and effective use of natural resources is one of our five key environment, health and safety objectives. In 2012, the company reduced our energy use at major company facilities from 2011 levels by 6.3 percent for electricity and 7.0 percent for natural gas. Our municipal water consumption was over 3,600 million gallons, 96 percent of which goes to our steam generation. We continue to look for ways to protect our waterways through the efforts of our Water Vulnerability study and Spill Management Team. Along with protecting the waterways, we also look to protect the land our business impacts. We have made substantial investments in investigating, and, when necessary, remediating sites where our operations have historically impacted land. In our transmission corridors, our vegetation management plan helps to ensure the upkeep of the land throughout our service territory. Finally, while our focus is on the conservation of resources, we also stress the importance of recycling our waste. In 2012, we recycled 90 percent of the non-hazardous waste generated, with our largest material streams recycled at Con Edison of New York being clean construction fill (36,931 tons) and metal (8,382 tons).

Our competitive businesses have a positive impact on the environment through the development of clean energy. In 2012, Con Edison Development tripled its portfolio of solar generation assets, bringing on 120 MW of new generation and making them the fifth largest solar project owner in North America. Con Edison Solutions promotes the development of clean energy through their Green Power Green-e certified product, offering customers 100 percent renewable energy. In 2012, total deliveries of Green Power were 265,000 megawatt hours.

Finally, we acknowledge that in order to make lasting impacts on the environment, we must be a part of the policy conversation at all levels. New York State has created a number of programs designed to achieve the clean energy goals contained in the Renewable Portfolio Standard (RPS), Energy Efficiency Portfolio Standard (EEPS), Systems Benefit Charge (SBC), and Regional Greenhouse Gas Initiative (RGGI) policies. These programs are supported by collections from electric and natural gas customers of Con Edison. The company has an interest in evaluating these programs to make sure benefits are being delivered to our customers in the most cost-effective manner possible.

Our Business

The company’s businesses are influenced by many factors that are difficult to predict, and that involve uncertainties which may materially affect actual operating results, cash flows, and financial condition.

The company’s Enterprise Risk Management (ERM) program was established to identify, assess, manage, and monitor its major operations and administrative risks based on established criteria for the severity of an event, the likelihood of its occurrence, and the programs in place to control the event or reduce the impact. Significant risks are discussed with the Board of Directors and its committees throughout the year.

Our ability to address these risks is supported by a rigorous auditing program to confirm regulatory compliance, that proper procedural requirements are correctly implemented, and to gather information that can help drive continuing improvement.

As energy demand increases, we continue to enhance our infrastructure. Our electric grid is built to meet peak demand, which could grow by about 20 percent over the next 20 years. Con Edison of New York plans to invest an average of $1.7 billion per year in its electric, gas, and steam infrastructure over the next 20 years, totaling $33.7 billion in 2012 dollars. Orange & Rockland plans to invest approximately $130 million per year in its electric and gas infrastructure over the same time period, totaling $2.5 billion in 2012 dollars. At the same time, our competitive businesses will continue to encourage clean energy development through the sale of Green Power and the development of solar projects in the United States. This means customers will have a reliable grid and the ability to use clean energy to power their needs.

Moving Forward

As we look toward 2013 and beyond, we will use our successes and lessons learned in 2012 to drive continued improvement for all our stakeholders. Our commitment to excellence in all areas of our business, steered by our long range plan and our sustainability strategy, will ensure that our business continues to provide shareholders a fair return while providing our customers the reliability they need, supporting our local communities, protecting the environment, keeping our employees and the public safe, and identifying ways that we can continue to innovate and modernize our business to better achieve our company’s mission.

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